Foreign banks try new strategies in trying times

Home > Business > Finance

print dictionary print

Foreign banks try new strategies in trying times



Foreign financial institutions struggling in Korea are changing their strategies and revamping their public images to survive.

One of the biggest changes in strategy is ditching the double-layered group system and strengthening their local operations by appointing new Korean leaders.

Citigroup and Standard Chartered both announced recently they will disband their group systems in Korea, in which a holding company controls affiliated financial businesses including the bank, by selling some unprofitable businesses and concentrating on the banks’ operations.

As part of the move, Citigroup Korea yesterday announced it will appoint a new chief executive officer to lead the bank.

Park Jin-hei, the current senior executive vice president of Citibank Korea, was internally promoted after Ha Yung-ku, five-term chairman and CEO of Citigroup and Citibank Korea, tendered his resignation to run for the KB Financial Group chairmanship earlier this month. Ha failed to win that race. He will step down after being at the helm of the bank for the past 14 years.

Ha has been criticized by the bank’s trade union for his “dictatorial” style and the group’s falling profits.

Citigroup Korea recorded a 81.5 billion won ($77 million) loss in the first half of this year. Its annual net profit fell from 627 billion won in 2010 to 219 billion won last year. The group has decided to sell its alternative financial services business by next year.

Since Park is known as an expert in corporate finance, it is rumored that Citibank wants to focus more on the corporate banking business.

Such speculation has been reinforced by the bank’s closing of 59 retail branches by the end of this year, which was interpreted as an abandonment of the retail business.

Since summer, the American bank’s operation in Japan has been cutting back on its retail business, especially since the Japanese government’s loose monetary policy has kept interest rates low.

The Korean industry has similar problems as the Bank of Korea has lowered the nation’s key borrowing rate twice since August.

However, Citibank Korea denied such speculation.

“It is not true that we will stop the retail business,” said a spokeswoman for the bank. “What is clear is that there will be no more shutting of any branches.”

London-based Standard Chartered is also going to nominate a new Korean CEO for its bank. This will be the first time SC Korea has put a Korean at the top position since its entry in 2005.

Plus, Standard Chartered will establish a regional head office in Korea and disband the current holding company Standard Chartered Korea. It is also in the middle of selling its savings bank and alternative financial services business.

Ajay Kanwal, current president and CEO of the holding company and the bank, will be leading the head office, not the bank.

The bank subsidiary, Standard Chartered Bank Korea, will be operated independently in the market.

SC Korea has also been seeing growing losses in the Korean market. It recorded a net loss of 38.6 billion won in the first half of this year. It is also in the process of consolidating 50 bank branches by the end of the year as part of its plan to scale down retail banking.

Whether the structural changes or appointment of new leaders will help the troubled foreign banks remains questionable. For a decade, both banks have been rumored to be planning to leave Korea and have been criticized by their unions for not investing.

BY SONG SU-HYUN [ssh@joongang.co.kr]


More in Finance

Loans to self-employed grow at slower pace in third quarter

Credit card payments in Korea rise in October on year

Kospi breaks record for second day in a row

Flush banks ditching employees ASAP

Record breaking

Log in to Twitter or Facebook account to connect
with the Korea JoongAng Daily
help-image Social comment?
lock icon

To write comments, please log in to one of the accounts.

Standards Board Policy (0/250자)

What’s Popular Now